Wall Street Values Paper 1
Wall Street, Market Information, and the Financial Crisis
The market is supposed to be clear and efficient in relation to the information it provides but this isn’t possible when the very firms that create the information, are holding back the slices that have a profound impact on the market’s activities.
The first business model was created in an effort to strengthen the link between the client and the firm in which it did business. This meant providing the client with honest information in regards to the trades it was partaking in. When the rules governing public firms changed in regards to raising capital through public offerings, the model quickly changed. The realm of market information was quickly skewed because the link between responsibility and business deteriorated. Before the change, the employees at a firm were directly liable and responsible for their actions. With the dawning of mortgage-backed securities, made possible by the dismissal of the Glass-Steagall Act, firms became obsessed with this new form of trading. This move by Wall Street, helped to ultimately relinquish the line between the client and accurate information of the market from firms. In essence, it forced firms to hide certain information from anyone outside their own. They even bought into their own miscalculations and discrepancies in the process (i.e. incorrectly valuing certain types of assets and securities).
Goldman Sachs was a major player in the manipulation of the markets but that doesn’t leave other firms innocent. The Salomon Brothers scandal brought an insight into the dangers of proprietary trading and foresighted the risks and dangers of such trading activities. Two notable firms, that provided deceptive market information, would be that of Citigroup and JP Morgan respectively. Lehman Brothers was seen as a player in the manipulation of corporate data right up to the time they declared bankruptcy. In...